Postal Paranoia

The postal rate hikes, scheduled to take effect in July, have been widely reported to varying degrees of outrage, denial and acceptance. Rates are expected to jump an average 11.7 percent next month and ABM has been particularly vocal on behalf of its smaller publisher members, which may experience increases closer to 20 to 35 percent;especially if they’re unable to co-mail or co-palletize their shipments. The MPA sent its own proposal to the Postal Regulatory Commission that, in part, attempted to ease rate increases from what the association estimated would be up to 40 percent increase for smaller publishers down to 20 percent.

No Worries, Say Small PublishersBut there’s one constituency that may not be so worried after all: Those same smaller publishers. Some publishers with modest circulations, the same ones that will be further penalized by the USPS if they can’t co-mail or co-palletize, simply see it as an unpleasant cost of doing business. Further, they’ve budgeted for the increase in decidedly low-key fashion.

No one likes a vendor to increase its costs, and the rate increase by the USPS will have wide-ranging impact, but some publishers should roll with this punch in a not-so-dramatic fashion. "The postage used to mail the magazine represents about 5 percent of a publisher’s cost," says Joe Hanson, chairman of b-to-b publisher Professional Media Group. "If bulk postage goes up 10 percent, then the publisher’s costs go up half of 1 percent. One half of 1 percent doesn’t seem like very much of a hard stick in the eye."

In fact, the numbers are slightly higher than 5 percent, but not by much. According to ABM’s 2006 Publishing Cost Report, periodical class postage costs averaged 8 percent of total costs for member publishers with magazine revenues between $3 million and $4 million. Similarly, MPA estimates that in 2004, periodicals postage costs, across member companies big and small, were approximately 8.5 percent of total magazine costs.

"Nobody likes to have a rate increase and I’m not happy about how much it’s going to cost me," says Hanson. "On the other hand, it isn’t the end of the world. It isn’t even a major impact on most smaller publishers."

Peter Craig, president of Western Publications Association, adds that the impact is real, but no one’s going to lose their business over it. "You shouldn’t be dismissive of the increase in costs, but it’s typically not a larger percentage of your overall costs. And we’ve yet to see someone who’s said, ‘Postal’s gone up, I’m going out of business.’ So it’s important that every dollar that someone takes out of your pocket cuts into your margins, but if printing and postage and manufacturing are 30 percent of your costs and you subtract printing and binding and paper, postage isn’t necessarily a very large percentage of the overall total."

Gretchen Jacobson, publications director for NACE International, has already budgeted for the postal increase;by boosting her ad sales by one ad. "I know there’s some worry in the industry with the rates going up, and I’m a periodicals publication. But my postage bill for materials performance is normally around $11,000 a month, so that’s not huge dollars for us. All I do is sell an ad and I cover the difference."

Jacobson has two publications. Materials Performance goes to 20,000 readers and Corrosion, which goes to 2,500. "I think there is a lot of hype. I don’t see how it’s going to change the direction of my business or that we’re going to suddenly go to lighter paper or few pages and things like that," she says.

Co-Mailing Can HelpJacobson is, however, looking at co-mailing services;a service her current printer can’t offer because her magazines are polybagged. Co-mailing and co-palletizing magazine shipments have been promoted both by publishers and the USPS as methods to avoid costly penalties and help drive distribution efficiencies. In the fall, Jacobson plans to switch to a printer that can co-mail, despite the polybags. Yet the money she saves by co-mailing is not what she’s most excited about. "We may save a little bit, but it’s not going to be thousands of dollars. It may be hundreds per month. But we get these issues out of the mail bags, which is what the post office is absolutely driving for. The magazines will arrive in better shape and, what I’m excited about, faster. My current printer is in Michigan, and it can take up to three weeks for the magazines just to hit the West Coast. They kind of limp along from post office to post office."

Postal Cost BreakdownWhile total annual postage costs for publishers, according to their representative associations, do amount to significant numbers, the percentage of total costs brings the figures into less dramatic focus.

Total Annual Postage CostsABM Members: $325 million per yearMPA Members: $1.6 billion per year

Average Percentage of Total CostsABM Members: 8 percent (magazine revenues $3 million-$4 million)MPA Members: 8.5 percent (average includes full range of big and small consumer publishers)